Why The Answer To The Smartphone Patent Thicket Is Not A Patent Pool

from the sorry,-but-no-thanks dept

We recently wrote about the incredible patent thicket in the smartphone space. For some reason, in the course of a few days, about ten different publications all created a very similar graphic about "who was suing whom" in the smartphone space for patent infringement. Unfortunately, most of those graphs had the wrong data and/or did not include non-practicing entities, who make up some of the most serious (and expensive) lawsuits in the space, and are certainly an important part of understanding the thicket. We created our own graphic here:

Anyway, with so much attention being paid to this patent thicket, of course it would only be a matter of time until someone popped up with a favorite "solution" to patent thickets: "patent pools." The WSJ Digits blog has an article about a forthcoming paper that compares the smartphone patent thicket to the sewing machine patent thicket in the 19th century, and suggests that the same solution used then could work now: just have everyone create a patent pool to share their patents.

We've heard this before, and explained before why patent pools aren't a really good solution. In fact, two years ago we pointed to new research showing evidence for why that famed sewing machine patent pool actually did more to hinder innovation than to encourage it. As we explained at the time:

First, companies scramble to get patents that can be included in the patent pool (rather than focusing on actually innovating in the market and understanding what the market wants). Once the pool is truly established, patenting decreases, because it's just not worth it to compete. After the patent pool dissolves, then others finally get back into the market. Second, because the patent pool locks in the effective "standard" early in the process, it might not actually be the best technology. In their research, Lampe and Moser found that this is exactly what happened with the first patent pool concerning the sewing machine. It "shifted the direction of innovation to an inferior technology... which was known to be significantly less robust, and unsuitable for mass production."

Then, once they're in the patent pool, they become anti-competitive: suing any upstart that tries to innovate and is not a member of the patent pool. So, effectively, rather than innovating, they use the patent pool to block any competition. Finally, once the patent pool is in place, the companies involved decrease their own pace of innovation, because they've basically just blocked out the competitors. Thus, they don't need to keep innovating at the same pace.

Are patent pools better than the legal jumble of lawsuits from the graphic above? Maybe. But are they the best solution out there? Absolutely not. Instead, a better solution would be to just let the market compete on the merits of the products and let the market decide, rather than focusing on any monopoly rights that will exclude innovators.

I read this interesting bit of history some years ago. I thought to myself at the time, this seems like a clear case of antitrust conspiracy. Keeping competition out of the market.

The problem today, is the overwhelming number of bad patents that would never stand up. A patent pool actually depends on the presumed validity of the patents therein. This has been called into question since the introduction of process patents. So, at some point, companies that hold patents which are undoubtedly valid, would have to acknowledge the likely invalidity of patents held by the likes of MS or Apple. Nokia, for example, holds many patents, most are for hardware some for software, they have a fairly high degree of quality to their leases. It would seem unjust for them to exchange legitimate research for the asinine patents the USPTO has been granting for the last 12 years.

Re: incentive and reward

Oops, you seem to have lost some context there. Let me help:

"First, companies scramble to get patents that can be included in the patent pool (rather than focusing on actually innovating in the market and understanding what the market wants). Once the pool is truly established, patenting decreases, because it's just not worth it to compete. After the patent pool dissolves, then others finally get back into the market."

(Emphasis on what you missed)

So, basically, what's being said is that yes, eventually the patent pool will be dissolved and others will be allowed into the market, but only after a large period of intellectual stagnation. Also, the members of the pool will fiercely stop any external innovation before it can happen and *gasp* compete with them. Hum...actually, isn't this strikingly similar to how a cartel works?